Bankruptcy, foreclosure, and late and missed payments are a big red flag in a credit report but those aren’t the only financial catastrophes that perturb lenders when it comes to offering start-up business loans.
Let’s have a look at what lenders look at apart from your credit score.
#1 Your business history
Your old reputation will lend a lot of credibility to your new business. While the business you are seeking start-up business loans for could be fairly new, your time in the business will be assessed by the lenders. This is to understand how well you have handled your finances in the past and how likely you’ll be able to manage your business loans in the future. Your stability is your big-ticket for acquiring the loan you have applied for.
#2 Your income and assets
The higher your income, the more comfortable the lender is to give you the business loans that you applied for. This is because a steady income indicates lower risks and assures a creditor that the borrower has the financial means necessary to cover the start-up business loans acquired and that money will not be lost.
Lenders are also mindful of a borrower’s liquid assets when giving a loan. This is so that if borrowers run into a financial emergency, they can use their stocks, bonds, money market accounts, or certificates of deposit, in the short-term, to cover their debt.
#3 Your credit reputation
When you apply for a business loan, the first thing lenders do is check your credit report card. The longer history you have with credit, the more reassured they feel about lending you the loan. Your credit reputation is typically calculated by taking out an average length of all of your credit accounts and sometimes even the age of your oldest account.
Before applying for start-up business loans, it is always advisable to avoid closing any credit accounts, as this is sure to raise a question in the lender’s mind and stop him from giving you the loan you need.
#4 Your online review
Gone are the days when you reviewed restaurants and movies, and no one reviewed you. These days, lenders are keeping a watch on what people are saying about your business online and basing their decision to lend you a loan or not on it. Word of mouth has now replaced online reviews and acquired their power, playing a huge role in impacting business loans of all kinds.
A borrower’s profile consists of all the above elements. Prepare yourself when you opt for a loan and make it a point to share all information for transparent dealings.